HOW TO CHOOSE THE RIGHT CARD

When shopping around for a rewards credit card there are a number of factors to consider to ensure you get the right one for you.

First, think about what type of rewards you want. The main options include frequent flyer points, merchandise, gift cards and cashback.

Of course, it’s not as easy as saying you want a free flight to London every year so you’ll go for a frequent flyer program; you need to consider your spending patterns. And this still comes with the caveat that you pay off your card every month. “If your spending is light it’s probably not flights as it will take too long to earn a flight,” says Canstar’s Mickenbecker. “Shopping vouchers are probably a better option.”

If you want to earn frequent flyer points, he suggests you ask yourself if you have an airline preference. This is a top tip from iFLYflat’s Steve Hui as well. “It’s not just about earning more points but think about where you want to go and whether the frequent flyer program will get you there,” he says. If you want to go Paris but only Qantas takes you there, then there’s no point choosing a card that earns points for Virgin.

“You need to weigh up the cost versus benefit,” says Hui. Consider how many airline points you’ll get per $1 spent and then factor in the annual fee. The higher it is the more you have to spend to be rewarded. Also keep in mind that some cards will charge both an annual fee and a fee for the rewards program, so it’s important to understand these costs before signing up.

Do your homework on the return after fees to see if the numbers work in your favour. Simplistically, if you have two cards that give you one point per $1 spent but one has a $99 fee and the other charges $249, then the $99 one will be a better option. Of course, it’s not always that simple as some cards have different earn rates depending on where you shop.

Redemption rates also matter and they aren’t all created equal. Try to find out what, say, 40,000 points will get you or what a $100 gift voucher at a major retailer will cost you.

Another thing to ask is whether points expire and if so after what period. Some, such as Qantas, have a soft expiry. You just need to earn or use Qantas points through your account at least once every 18 months for points not to expire. Also look out for point capping. Some cards will only let you earn a maximum number of points each month or year.

Another tip from Mickenbecker is to look at the flexibility of redemption. “You want choice or availability of the benefit where you like to shop,” he says.

The interest rate won’t be as important because a rewards cards really isn’t suitable if you can’t pay it in full each month but it’s still worth checking. But the number of interest-free days is worth looking into. This could give you more time to pay off your balance.